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NBA reprograms how it makes money off fans

Surprise and delight. Sounds like a simple enough concept for how to treat fans. The Orlando Magic have used that philosophy when it comes to interacting with their season ticketholders with the aid of

The Orlando Magic have used that philosophy when it comes to interacting with their season ticketholders with the aid of advanced data to help identify fans who might be considering not renewing or those looking for more from their visits to the Amway Center.

"One of the examples we love to use is to see if a family comes to the game every night and their halftime ritual is to go to Cold Stone Creamery," said Anthony Perez, the Magic's vice president of business strategy. "Maybe one of the servers wants to give them a surprise and delight moment and brings the Cold Stone to them. 'Hey, here's some Cold Stone, I know it's something that you like. And maybe we can catch up at halftime and see how the season is going for you.'

"It's just those little touches that we can now add that don't seem like a big deal, but to our fans it's all about the details."

The Magic have been among the top 10 in season-ticket renewals in the NBA for the last five years, and they credit not only their on-court success — they made the playoffs in all five seasons — but also their aggressiveness on the business side.

The team is out front in its level of understanding among teams in the NBA, but the Magic are not alone. The Phoenix Suns are involved in a similar program, and the league has a team marketing and business operations group that shares information and best practices.

"I think our teams are incredibly sophisticated when it comes to realizing the power of data to make smarter decisions faster, and that takes a variety of angles for a team," said Chris Granger, the executive vice president of the league's group. "Teams do things like retention modeling. What are the things that make a season ticketholder more or less likely to renew? We can now isolate at a very granular level what makes a difference. It helps us with our prioritization, and we can target our different accounts differently and move them and make sure they're getting the most from their experience."

In the sports world, advanced analytics, or what is more commonly known as Moneyball, challenges the idea that what you can see with your eyes only tells part of the story. In sports, there is an entirely different layer of information that can be gleaned and processed to understand potential.

Teams in every sport have adopted their own Moneyball philosophy on the field or court, so it should come as no surprise that teams have started to look at advanced analytics in other parts of their business. The growing trend of gathering and analyzing this type of data took center stage at the annual MIT Sloan Sports Analytics Conference last week in Boston.

The Magic partnered with SAS, a leader in business analytics software, to develop its analytics model.

The Suns said they were using the same type of advanced system software to understand their season ticketholders.

"We really see it as one of our top priorities," said Zaheer Benjamin, the Suns' director of financial planning. "We are being very aggressive and very eager to roll out better models for better resource allocation. On the season ticketholder side, what we're trying to do is predict if season ticketholders will renew their season tickets and really focus our resources on those fence-sitters, those customers we feel we can have the most impact by focusing our time and renewal resources."

The data also help teams understand their fans and what they want for their experiences in attending games.

"The fact of the matter is that you can make better decisions with good data and information," Magic CEO Alex Martins said. "Big businesses use it every day; they use it to determine what direction their business is going as well as what product lines they need to grow into.

"For us, it really helps us understand our customer; it helps us determine supply and demand for every part of our business and on the basketball side of our business. It ultimately helps to determine what the right decisions are, whether that is player personnel and procurement or lineups in specific games or the way that certain players need to approach the game, their preparation. The fact of the matter is that analytics is all about data, it's all about getting good information. And if you're going to make a good decision, you need good information."

The Magic no longer send printed tickets to their season ticketholders, instead sending them what is essentially a credit card with all of the tickets loaded onto them. When a fan enters the arena and has the card swiped, the Magic know whether the ticket is being used.

Using prizes and giveaways, the team has started to entice fans to scan their tickets at the concession stands and in the team shop to understand spending patterns.

"If people are utilizing their tickets more, they're more likely to renew their season tickets with us," Perez said. "If they're not utilizing their tickets to a certain extent over the course of the season, then they're at risk to not renew because as you'd expect they'd say, 'The value isn't really there for me. I don't actively use my tickets for games.' "

There is a "big brother is watching" feel to it all, but the Magic say if they respond to their fans it becomes a valuable communication tool. Martins points to changes that were made in the Mercedes Club after fans suggested more seating areas, diversified food offerings and food options for kids.

"I've been pleasantly surprised by the amount of input and feedback that we're getting," Martins said. "I think where the relationship becomes one of trust is when you listen to them and you act upon it. ...

"I think at first people may be leery, but there's always going to be a portion of fans that want to give you feedback, and that's good. We want it to improve the business and make the experience better for them."

SHARING: NBA views marketing as group responsibility

Granger pointed to collaboration among teams in the league, saying that "separates our league and our teams from others."

His group is tasked with understanding each team from top to bottom and providing information and support in virtually every aspect of a team's operation. It's that openness that's been driving advancements on several fronts but most notably the explosion of analytics in ticket sales.

"I think the NBA is fairly forward thinking," the Suns' Benjamin said. "We get a lot of support from the league office about analytics best practices. ... We get all the analytics resources from all the different teams; share best practices and really trade ideas and sort of help each other on the path toward becoming an analytical organization. I think you're going to see more and more of it in the future."

So what's next? What will teams be able to do with the data they have collected and what other type of data might be available.

"There's so much out there," Granger said. "It's like drinking from a fire hose. So you have to commit to getting smarter, and you have to commit to understanding that, 'I don't know all there is to know.' There's a lot of data that can inform me in different ways than in the past."

New York Knicks forward Carmelo Anthony, right, wife LaLa Vasquez and son Kiyan Anthony pose with a wax figurine of Anthony at Madame Toussauds New York on June 26, 2012.
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Heat forward LeBron James holds sons LeBron Jr. and Bryce during a pregame moment of silence to honor victims of the Newtown, Conn., shooting before a game Dec. 15, 2012.
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